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Tuesday, Nov. 15, 2011
Quarter's GDP hits 6% annual rate
Uncertainty for global, domestic economies cast cloud over future
By JUN HONGO
Japan's gross domestic product grew in the July-September period for the first time in three quarters, marking annualized growth of 6 percent, the Cabinet Office said Monday.
Economists remain skeptical, however, that the recovery will keep up in the next few quarters, citing uncertainties both at home and in the global economy, particularly over the European debt crisis and the yen's surging strength.
The GDP rise last quarter was led by the automobile industry, which recovered from the March 11 disasters and boosted exports by 6.2 percent.
Consumer spending also rebounded from March 11, growing by 1 percent from March-June.
It was the first GDP growth since the triple disasters devastated the Tohoku region and halted production and supply chains nationwide.
"The level of GDP growth is substantial, but it was within our range of predictions. There is no surprise," Japan Research Institute economist Yusuke Shimoda told The Japan Times.
Shimoda said the growth of 6 percent is a clear sign that both the supply chain and consumer spending sentiment are on the path to recovery and that GDP could continue to rise for the time being.
But he also warned that the economy won't be able to sustain that powerful rate.
"The recovery will continue, but such strong growth is unlikely to persist" in the next few quarters, he said, explaining that Europe's sovereign debt crisis as well as the yen's strength against other major currencies will inevitably hurt the Japanese economy.
"The cost of rebuilding Tohoku will begin to take effect on household incomes. That is also a reason" to expect a dip in consumer spending, Shimoda added.
"Restoring the supply chain following the Great East Japan Earthquake made progress quickly in the summer," economic and fiscal policy minister Motohisa Furukawa said Monday.
But Furukawa also acknowledged that signs of a slowdown are already visible.
The yen remains at a historic high despite government interventions taking place as recently as last month, and Japan's exporters say they are being hit awfully hard.
"We must watch closely the risks of overseas economies deteriorating and the yen's quick rise as well as other factors such as the impact of the flooding in Thailand," Furukawa said.
Hidenobu Tokuda, an economist at Mizuho Research Institute, agreed.
"The GDP's high growth announced Monday shows that the supply chain is recovering strongly following the quake," he said, but the momentum will eventually wear out.